LITTLE ROCK – During the 2023 regular session the Arkansas legislature not only continued to lower state income taxes, but also reduced homeowners’ property taxes.
Act 315 lowers property taxes by increasing the homestead property tax credit from $375 to $425 a year. It is effective beginning with assessment year 2023.
In 2024 the act will save Arkansas homeowners an estimated $34 million, and in the following year savings will increase to $34.8 million. Homeowners that receive the homestead property tax credit will get a credit of $425 to offset their property tax liability.
The major tax reduction of the 2023 legislative session was Senate Bill 549, to reduce individual income taxes by $100 million a year and corporate income taxes by $24 million a year.
The legislature also approved HB 1045 to phase in a new method of calculating the income tax owed by companies that do business in multiple states. Tax savings will begin modestly because it is being phased in. Businesses in Arkansas will save $10.6 million next year.
Those savings go up dramatically and by 2030 will be more than $74 million a year. Sponsors of HB 1045 say it will make Arkansas more competitive when we recruit new industries.
The legislature has enacted tax cuts in every session since 2015, when lawmakers approved Act 22. It lowered income taxes by $102 million a year, mainly for middle-income families. In 2017 the legislature lowered income taxes for low-income families by $50 million a year and for retired veterans by $13.4 million a year.
In 2019 the legislature lowered individual income taxes for upper income and middle income families, saving them $97 million a year. The homestead property tax credit was increased too.
In 2021 the legislature passed historic income tax cuts that save Arkansas families and businesses $500 million a year. The package will benefit taxpayers in all brackets. In 2022 legislators accelerated the 2021 tax cuts.
Since 2015 the legislature has lowered the personal income tax rate from 7 percent to 4.7 percent. Over the same period legislators have lowered the corporate income tax rate from 6.5 percent to 5.1 percent.
The tax reductions were made possible because the legislature consistently budgeted very conservatively. Even with the tax reductions, state government has accumulated a surplus of more than $1.6 billion.
The state general revenue budget, which pays for day-to-day operations, will be about $6.2 billion for the fiscal year that begins July 1.
The availability of reserve funds will make it possible for the state to build prison space for an additional 3,000 inmates, which reinforces the criminal justice bill that was approved late in the session.
The bill requires dangerous offenders to serve 85 percent or even 100 percent of their sentences. It also requires inmates to earn good time by finishing programs like drug rehabilitation, mental health treatment and job training.
Those programs better prepare inmates to transition to the outside world, because while in prison they will have incentives to better themselves and learn skills necessary for being a productive citizen.
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